[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
FILED
No. 98-6147 U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
2/01/99
D. C. Docket No. CV-97-L-140-S THOMAS K. KAHN
CLERK
HERBERT A. SLAMEN,
Plaintiff-Appellant,
versus
PAUL REVERE LIFE INSURANCE COMPANY, a corporation,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(February 1, 1999)
Before DUBINA and BARKETT, Circuit Judges, and JONES*, Senior Circuit Judge.
BARKETT, Circuit Judge:
Appellant Herbert Slamen appeals from an adverse post-trial order dismissing his claim for
disability insurance benefits under the Employee Retirement Income Security Act of 1974, 29
U.S.C.
_______________
*Honorable Nathaniel R. Jones, Senior U.S. Circuit Judge for the Sixth Circuit, sitting by
designation.
§§ 1001, et seq. (“ERISA”).1 Slamen contends that his disability insurance policy was not governed
by ERISA and that the federal district court lacked subject matter jurisdiction over his suit against
the Paul Revere Life Insurance Co. for refusing to pay benefits under Slamen’s policy. Slamen
contends that the district court should have remanded the case to the Alabama state courts,
permitting Slamen’s state law breach of contract and tort claims to proceed.
BACKGROUND
On February 1, 1981, Slamen’s solely-owned dental practice established a health plan
providing health and life insurance coverage from the Centennial Life Insurance Company for
Slamen and his employees.2 This plan did not provide disability benefits to any employee. In 1985,
Slamen purchased a disability insurance policy from Paul Revere, which only covered himself. As
with the health and life insurance policies, the premiums under the disability insurance policy were
paid by Slamen’s professional corporation, “Herbert A. Slamen, D.M.D., P.C.”
On December 11, 1996, as a result of Paul Revere’s refusal to pay benefits under Slamen’s
disability insurance policy, Slamen filed this action in the Circuit Court for Jefferson County,
Alabama alleging that Paul Revere’s refusal to pay was in breach of contract and was tortious. Paul
Revere removed the case to federal court and Slamen sought a remand to the state courts. The
district court denied the motion to remand and dismissed Slamen’s state law claims as preempted
1
Although this appeal arises from the district court’s resolution of Slamen’s ERISA
claim, Slamen’s argument focuses on the district court’s denial of his motion to remand the case
to the Alabama state courts.
2
The insurer on the life and health insurance provided to Slamen’s employees has since
changed. Since 1984, Slamen’s employees participate in the Comprehensive Security Trust,
underwritten by the Vulcan Life Insurance Company.
2
by ERISA, allowing Slamen leave to amend for the purpose of stating an ERISA claim. After a
bench trial, the district court entered judgment for Paul Revere on Slamen’s ERISA claim. This
appeal followed.
DISCUSSION
The sole issue raised on appeal is whether Slamen’s disability insurance policy is an ERISA
employee welfare benefit plan. If Slamen’s disability insurance policy is governed by ERISA, the
district court correctly recharacterized Slamen’s claims as ERISA claims and denial of the motion
to remand was proper because ERISA claims arise under federal law. Whitt v. Sherman Int’l Corp.,
147 F.3d 1325, 1329-30 (11th Cir. 1998). However, if Slamen’s disability insurance policy is not
an ERISA plan and Slamen was not entitled to seek relief under ERISA, “no federal question
jurisdiction exists” and the case must be remanded to the state courts.
Id. at 1330.
ERISA defines an employee welfare benefit plan as
any plan, fund, or program which was heretofore or is hereafter established or
maintained by an employer or by an employee organization, or by both, to the extent
that such plan, fund, or program was established or is maintained for the purpose of
providing for its participants or their beneficiaries, through the purchase of insurance
or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the
event of sickness, accident, [or] disability . . . .
29 U.S.C. § 1002(1). In Donovan v. Dillingham,
688 F.2d 1367 (11th Cir. 1982) (en banc), we set
forth five requirements that must be established for an employee welfare benefit plan to fall within
ERISA’s scope. “[A] welfare plan requires (1) a ‘plan, fund, or program’ (2) established or
maintained (3) by an employer or by an employee organization, or by both, (4) for the purpose of
providing medical, surgical, hospital care, sickness, accident, disability . . . benefits . . . 5) to
participants or their beneficiaries.”
Id. at 1371. “[A] ‘plan, fund, or program’ under ERISA is
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established if from the surrounding circumstances a reasonable person can ascertain the intended
benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.”
Id.
at 1373.
However, not all welfare benefit plans that meet these five criteria are governed by ERISA.
As Donovan explains,
[t]he gist of ERISA’s definitions of employer, employee organization, participant,
and beneficiary is that a plan, fund, or program falls within the ambit of ERISA only
if the plan, fund, or program covers ERISA participants because of their employee
status in an employment relationship, and an employer or employee organization is
the person that establishes or maintains the plan, fund, or program. Thus, plans,
funds, or programs under which no . . . employees or former employees participate
are not employee welfare benefit plans under Title I of ERISA.
Id. (footnotes omitted);
29 C.F.R. § 2510.3-3(b) (1998) (“[T]he term ‘employee benefit plan’ shall
not include any plan, fund, or program . . . under which no employees are participants covered under
the plan.”).
Thus, in order to establish an ERISA employee welfare benefit plan, the plan must provide
benefits to at least one employee, not including an employee who is also the owner of the business
in question. See Williams v. Wright,
927 F.2d 1540, 1545 (11th Cir. 1991);
29 C.F.R. § 2510.3-
3(c)(1) (1998) (“An individual and his or her spouse shall not be deemed to be employees with
respect to a trade or business, whether incorporated or unincorporated, which is wholly owned by
the individual or by the individual and his or her spouse.”); see also Peterson v. American Life &
Health Ins. Co.,
48 F.3d 404, 407 (9th Cir. 1995) (“Neither an owner of a business nor a partner in
a partnership can constitute an ‘employee’ for purposes of determining the existence of an ERISA
plan.”); Meredith v. Time Ins. Co.,
980 F.2d 352, 357 (5th Cir. 1993) (“These regulations prevent
Meredith from being simultaneously an employer and an employee.”).
4
Slamen argues that the disability insurance policy he purchased from Paul Revere in 1985
was not an ERISA plan because he wholly owned the dental practice and was the only person
covered under the disability insurance policy. Thus, by virtue of § 2510.3-3(c)(1), he argues that
he could not be considered an employee for purposes of determining whether the disability
insurance policy was an ERISA plan. We agree. Slamen’s disability insurance policy covered only
himself. No employees received any benefits under the plan and there is nothing in the record
showing that the disability insurance policy bears any relationship to the health and life insurance
benefits that Slamen provides to his employees. On the contrary, the two policies were purchased
at different times, from different insurers, and for different purposes. The first policy covers
Slamen’s employees as well as himself, while the second policy only covers Slamen and was not
designed to benefit Slamen’s employees.
In light of these facts, we are not persuaded by Paul Revere’s argument that ERISA
nonetheless applies here because Slamen had in place other insurance for his employees. In Kemp
v. IBM Corp.,
109 F.3d 708 (11th Cir. 1997), we held that “non-ERISA benefits do not fall within
ERISA’s reach merely because they are included in a multibenefit plan along with ERISA benefits.”
Id. at 713. Applying this principle, we held that an employer’s retirement education assistance
benefits were not benefits protected by ERISA and that their inclusion in a broader multibenefit plan
did “not turn the non-ERISA benefit into an employee welfare benefit plan.”
Id. By analogy,
Slamen’s disability insurance policy – which is not, by its terms, an ERISA plan – is not converted
into an ERISA plan merely because Slamen also provides ERISA benefits to his employees. See
Zeiger v. Zeiger,
131 F.3d 150,
1997 WL 737659, at * 1 (9th Cir. Nov. 25, 1997) (“A non-ERISA
plan is not converted into an ERISA plan merely because an employer also sponsors a separate
5
benefits plan subject to ERISA.”).
Indeed, in Robertson v. Alexander Grant & Co.,
798 F.2d 868 (5th Cir. 1986), the Fifth
Circuit applied this very reasoning in holding that ERISA did not apply to a plan covering only
partners. The court rejected the argument that ERISA applied because the plan also covered
principals, a class of employees, finding that this claim
ignores the fact that the plans, however similar, are two separate plans. The plan
covering the partners does not pay any benefits to principals, and the plan covering
principals does not pay any benefits to partners. Since the plans are separate, the
plan covering partners covers only partners, and the district court correctly ruled that
the plan does not cover employees other than partners.
Id. at 871-72; see also In re Watson,
161 F.3d 593, 596 n.4 (9th Cir. 1998) (treating benefit plan that
only provided benefits to physician owner separately from plan for nurse employees because “they
are independent plans under ERISA”). This reasoning is equally applicable here.3
Moreover, Paul Revere’s argument is inconsistent with the purpose of excluding benefit
plans that provide benefits only to employers from ERISA’s broad scope. ERISA excludes
employer benefit plans from its broad scope because “[w]hen the employee and employer are one
and the same, there is little need to regulate plan administration.” Meredith,
980 F.2d at 358. In
light of the clear exclusion of benefit plans covering only owners from ERISA’s scope, we think that
it makes little sense to treat a benefit plan, which covers only a business owner such as Dr. Slamen,
3
Paul Revere offers us a number of cases from other federal courts of appeal to support
their assertion that we should consider the overall insurance coverage offered by Slamen, rather
than the disability insurance policy, but those cases are distinguishable. See Peterson,
48 F.3d at
407-08 (finding that the American benefit plan that only covered a partner was an ERISA plan
because it “originally covered a non-partner employee in addition to Peterson and his partner”);
Madonia v. Blue Cross & Blue Shield,
11 F.3d 444, 448 (4th Cir. 1993) (recognizing that owner
of corporation could not be sole participant in employee benefit plan, but finding ERISA applied
because “MNA’s plan benefitted employees other than Dr. Madonia”).
6
as a component of the employer’s employee benefit program. Instead, we agree with Robertson that
an employer benefit program must be analyzed separately from an employee benefit program absent
evidence – not present here – showing that the two programs are related.4
In conclusion, Slamen’s disability insurance policy is not an ERISA plan because all the
benefits flow to the owner, Dr. Herbert Slamen. Because the plan is not governed by ERISA,
Slamen’s action for the recovery of benefits did not arise under ERISA and the district court was
without federal jurisdiction over Slamen’s claim. Accordingly, the district court erred in denying
Slamen’s motion to remand. The judgment of the district court is REVERSED with instructions to
remand this case to the Alabama state courts.
4
Nor does the fact that the premiums were paid by Slamen’s professional corporation,
rather than Slamen himself, dictate a contrary result. As we have said, to establish that the plan
in this case is governed by ERISA, Paul Revere would have to show that an employee other than
Dr. Slamen received benefits under the disability insurance policy. Paul Revere has failed to
make this showing and the clear import of the ERISA regulations is that Dr. Slamen cannot be
considered an employee of the professional corporation which he owns.
7
